Summary of Material Terms of The Pantry, Inc. 2008 Annual Incentive Program
Exhibit 10.11
Summary of Material Terms of
The Pantry, Inc. 2008 Annual Incentive Program
The Pantry, Inc. 2008 Annual Incentive Program (the “Program”) is a compensatory program under The Pantry, Inc. 2007 Omnibus Plan that was established on February 7, 2008 by the Compensation and Organization Committee (the “Committee”) of the Board of Directors of The Pantry, Inc. (the “Company”). The Program provides for performance-based cash awards to certain of the Company’s employees, including its executive officers. Executive officers are eligible for awards under the Program based on threshold, target, and maximum performance levels set by the Committee, and the actual award amounts, if any, will therefore vary depending on the achievement of certain performance goals by the Company. The Program’s performance cycle is for the Company’s 2008 fiscal year, which began on September 28, 2007 and ends on September 25, 2008 (“fiscal 2008”).
The Board approved the following performance measures and their respective weights for the Company’s executive officers because the Board believed these performance measures would be key indicators of the Company’s overall financial and operating results during fiscal 2008:
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| • | Adjusted EBITDA (weighted at 55%), which is defined as net income before interest expense, net, loss on extinguishment of debt, income taxes, and depreciation and amortization but including the lease payments the Company makes under its lease finance obligations as a reduction to Adjusted EBITDA. |
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| • | Merchandise sales growth (weighted at 15%), which is defined as year-over-year growth in merchandise sales on a comparable store basis. |
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| • | Gasoline gallons growth (weighted at 15%), which is defined as year-over-year growth in gasoline gallons on a comparable store basis. |
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| • | Turnover (weighted at 15%), which is defined as the total number of employees (excluding those who were terminated in connection with the restructuring program the Company initiated in September 2007) who have left the Company in a given period of time to the number of employees in position at the end of the period. |
Under the Program, each performance measure operates independently of the other measures. That is, an award may be paid when the threshold performance level is achieved for any single measure, without regard to results for the other measures. The Board approved the targets for each performance measure based upon the Company’s approved internal budget estimates.
Under the Program, the target award opportunity for the Company’s chief executive officer will be 75% of his annual base salary in effect on date the Program is adopted; the target award opportunity for each of the Company’s other executive officers will be 50% of his or her annual base salary in effect on the date the Program is adopted.
Actual award payouts for the Company’s executive officers can vary from 25% of target awards for achieving or exceeding the threshold performance level to 200% of target awards for achieving the maximum performance level. For any performance greater than the threshold
performance level and less than the maximum performance level but not equal to the target performance level, the appropriate payout percentage will be interpolated on a straight-line basis accordingly. For any performance below the threshold performance level, the appropriate payout percentage is 0%.
The Committee may make award payouts or otherwise increase, reduce, or eliminate payouts that would otherwise be made under the Program in its sole discretion. Executive officers who join the Company during fiscal 2008 will have any award amounts prorated, except that no executive officer hired after the end of the third quarter of fiscal 2008 will be eligible to receive an award under the Program. Participants must be employed on the date awards are paid in order to receive a payout, except that participants whose employment is terminated due to death or disability or as otherwise determined by the Committee in its discretion may have their award amounts prorated and paid on the date other awards are paid in the discretion of the Committee.
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